Former CFO-Enron “Rules vs Principles- Understanding the Difference Between What is Right to do and What You Have the Right to do.” Despite today’s more regulated and enlightened business environment, we continue to witness “Enron-esque” failures of corporate governance and compliance. Fastow… In all three cases, there was an unequivocal sentiment that the companies were behaving unethically. It is, therefore, our responsibility as future business leaders to be responsible for and conscious of our own agency. In the treating of Arthur Andersen from the first fraud they were ever involved in. This is how they were being PAID. “My just asking the question, ‘Am I following the rules?’ was insufficient,” Fastow said. And there was an intense company culture of being the smartest people that were compensated disproportionately for finding and exploiting loopholes in everything they did (hence the energy crisis in CA…which I find hard to believe Andy had anything to do with). Linkedin; Business News. What I had failed to capture, in a story meant to celebrate Fastow as a CFO wunderkind, was his shrewd manipulation of the accounting rules, which was unbeknownst to me and the impartial panel of CFOs who selected him for the award. However, none of them had personally suffered from Fastow’s criminal manipulations. Linkedin. See the complete profile on LinkedIn and discover Andrew’s connections and jobs at similar companies. I received anonymous emailed death threats, perhaps from embittered employees and shareholders. These ideas all came from Andersen. You are no longer talking words and weighing ideas, you are seeing their reality. Why did Jeffery Skilling and Andrew Fastow go to jail for their involvement in Enron’s collapse? One was Enron lawyer Kristina Mordaunt, who in March 2000 was invited into a Fastow venture called Southampton Place. They were arrogant and aggressive. He subsequently entered a plea agreement, forfeited his net worth of $24 million, and served a six-year prison sentence in a federal detention center in Oakdale, Louisiana. Not surprisingly, when Enron approached insolvency, index scores fell precipitously, signaling high amounts of tension among executives. For the story, I interviewed Fastow, Enron’s CEO Kenneth L. Lay, and president and COO Jeffrey K. Skilling. All would soon become notorious. Two years after the story appeared, Enron became the biggest accounting scandal in American history. I realize he may have been fully aware things were past the point of “finding loopholes” by the time LJM appeared, but if that were me, I don’t know if I would have know how to pull the rip cord. Next, Fastow reasoned to the audience that it was not fair that he gave us the cases without the accounting and legal rules governing each situation. And in WorldCom employees were even encouraged to put all of their money in the pension funds which were then depleated by the CEO via a loan the board gave the CEO because his salary was also all in shares. In 1999, a 37-year-old Andrew Fastow received a CFO Magazine award for capital structure work at Enron. Fastow started the session by sharing his personal cell phone number so students could ask him questions. Or what about if he ditched his wife to marry a stripper like Lou Pi? For that, I deserved to go to prison.”. T.H.A.N.K.S. Twenty years ago, CFO gave Enron finance chief Andrew S. Fastow a CFO Excellence Award in the category of “capital structure management.” In a feature story naming him an award recipient, Fastow said, “Our story is one of a kind.” Little did he know how prophetic those words would soon become. Andrew Fastow was the Chief Financial Officer of Enron when the company infamously collapsed into bankruptcy in December 2001. So, it dismisses or minimizes the risk.”, Making company results appear better than they are is actually not dissimilar. She wrote a blog about former Enron Chief Financial Officer (CFO) Andrew Fastow’s virtual talk to Ivey students on March 23. P.S. It’s a difficult question. As someone linked to him in perpetuity, I’m happy for that. Fastow’ harm extends well beyond the financial losses of Enron employees and investors. Share to Facebook; Share to Twitter; Share to Linkedin; People Search: 1. Russ Banham is a Pulitzer-nominated financial journalist and best-selling author. “I should have also been asking the question whether or not my behavior was ethical. They intimidated market analysts, they manipulated energy in California that led to blackouts. Most of Enron’s employees had invested their retirement savings in the company’s stock. I worked for Arthur Anderson. He responded with an analogy about Bill Belichick, head coach of the New England Patriots, who says he uses obscure football rules to his team’s competitive advantage and to make sure it wins. For each, he spent a few minutes explaining the situation, and asked if the actions of the company were ethical. Enron was before our time. I asked Fastow if he believes other CFOs ever feel compelled to exploit the rules. Andy didn’t just bend the rules and use loopholes, he structured deals and lied about side deals. The epic modern day version of ‘The Emperor has no clothes’. During a Skype interview, he set up his laptop so I could watch a video of his keynote speech on trust and ethics in front of 2,000 people at the “InTheBlack: Accounting & Finance Innovation Summit” in Las Vegas, sponsored by BlackLine. First off, Alex Gibney’s documentary, which is based on the book they talked about, is great. Here is where things went wrong. Andrew Fastow knows about the gray areas. N.O. The CFO article on Fastow was the first in-depth piece of journalism to lay out the complex finance and accounting strategies that underpinned Enron’s meteoric rise. Bank robber Willie Sutton spent his last years consulting with banks on theft-deterrent techniques. “How is it possible to have all these smart people approve these deals and end up committing the greatest fraud in corporate history?” Fastow asked me. I just saw an online ad promoting a conference where he is one of the headlines speakers. In the story, Fastow was lauded. Article content (Bloomberg) — Andrew Fastow, who was at the center of the fraud which brought down Enron Corp., said he now accepts full responsibility for his actions after originally viewing himself as a “hero” while chief financial officer at the energy trading giant. The easier that is, the greater the chance of doing it. Fastow urged us to always look for more information. Fastow ended his speech with a simple but powerful call to action: “Set a reminder on your phone every year, even every quarter, with just two questions: One, am I following the rules? Despite it all, though, his family held together, offering him a measure of solace. You’re processing risk in a biased way—`it won’t happen to me and even if it does it won’t be that bad.’ Your brain knows the answer you want—that you want to live in L.A. He had been the chief engineer of the deals that made Enron’s financial performance and balance sheet appear much stronger than they were. After we got introduced to the main player's Ken Lay & Jeff Skilling let us move to know about Andrew Fastow the CFO & … I write this prologue for a reason. In our subsequent discussions via Skype, two of his comments stood out. Toronto, Ontario, Canada, HKCEC
For these transactions, Fastow owns two mementos: a CFO of the Year trophy and a prison ID. I don’t think I would want to be in the same room with him. The other was his contention that the Sarbanes-Oxley Act, created in 2002 to prevent another Enron debacle, will not stop another Enron from happening. And yet you don’t wake up every morning worrying about your family dying in a massive quake or your net worth being obliterated. How can a person pit billions of dollars for themselves against life savings and day to day meals for thousands? Andersen was very favored indeed to have been able to go through time doing the same scheme across so many companies, for years, without any ‘guilty plea’ and to simply pay out, because for them it is quicker than waiting out a trial. As the audience was HBA1 students, most of us were only four years old in 2001. Who use LinkedIn to request an interview LinkedIn ; People Search: 1 students could ask him.. 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